Bigger-Than-Forecast Turkish Central Bank Rate Cut – Currency Thoughts

Bigger-Than-Forecast Turkish Central Bank Rate Cut

September 11, 2025

A reduction of the Central Bank of Turkey‘s one-week repo auction rate to 40.5% from 43.0% exceeded analyst expectations and the sixth policy rate change amounting to 250 basis points or more since December. Not all of those moves were reductions, however. Three consecutive 250-bp  cuts last December, January and March were followed by a 350-basis point hike in April before cutting resumed with a 300-bp cut in July. That chaotic pattern, admittedly in the extreme, is all one needs to know about the imprudence of compromising on having a firewall between politicians and the deciders of monetary policy. The roller-coaster ride of central bank policy interest rates merely mimics an even more extreme trend in inflation and wild swings in the Turkish lira, too. From 85.5% in October 2022, Turkish consumer price inflation subsided to 38.2% in mid-2023, only to spike to 75.45% in May 2024, and now it’s back down to 32.95%, which is still far above the ultimate goal of 5%.  According to a statement, “Recent data indicate that demand conditions are at disinflationary levels. Food prices and service items with high inertia are exerting upward pressure on inflation. Inflation expectations, pricing behavior, and global developments continue to pose risks to the disinflation process.”

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Central Bank of Turkey

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on Thursday, September 11th, 2025 at 7:24 am and is filed under Central Bank Watch.
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